What can secure a business loan?
Security may include commercial property, equipment or other business assets the lender accepts. A charge gives the lender rights over specified assets if the business defaults. Existing borrowing, asset ownership and the order of charges affect whether new security is available.
A personal guarantee is different: it is a promise by an individual to meet an obligation if the business cannot. A secured loan can also require a guarantee. Ask which assets and people are exposed, whether liability is capped and how any guarantee is released after repayment.
Loan-to-value is not the same as spare cash
If a property is valued at £300,000 and total lending secured against it would be £180,000, the combined loan-to-value is 60%. If £120,000 is already secured on it, adding £60,000 creates that total exposure. This is arithmetic, not a lender’s acceptable limit.
A lender may use a different valuation or decline a second charge. Equity alone does not establish affordability: the business still needs cash to make payments. A falling valuation can also restrict refinancing when the facility ends.
What lenders normally assess
Prepare recent business bank statements, filed and management accounts, existing debt details, an asset schedule and a forecast explaining the purpose of the loan. For property, the lender may need a professional valuation and legal checks on title, use and existing charges.
There is no single minimum turnover or trading period across all secured lenders. A valuable asset does not guarantee approval for a business with an unworkable repayment plan. Explain unusual transactions, arrears and any changes in ownership before a decision is made.
Compare interest, fees and the cost of securing the loan
Request the net amount released, interest basis, repayment schedule and total repayable. Arrangement, valuation, legal and registration charges can make a lower-rate offer more expensive, especially for a small amount or a short borrowing period.
Check whether interest is fixed or variable, whether fees are added to the debt and what happens on early repayment. If refinancing is expected, include its likely costs and a fallback plan. Do not treat an advertised starting rate as a representative APR.
When a different structure may fit better
For a specific vehicle or machine, compare asset finance rather than charging a wider pool of assets. For a timing gap on eligible customer invoices, invoice finance may match the need more closely. An unsecured loan avoids a specified asset charge but can still carry a personal guarantee.
Get independent legal advice on the security and guarantee documents before signing. If the business misses payments, enforcement can affect operations as well as ownership. Borrowing against an essential asset to cover recurring losses can postpone rather than solve the underlying problem.
A few things worth knowing
Common questions
Can I secure a business loan on my home?
Some commercial arrangements may involve residential property, but this carries serious personal risk and different regulatory considerations. Do not assume it is suitable or that every lender accepts it. The Growth Guarantee Scheme separately prohibits taking a principal private residence as scheme security.
Does security guarantee a lower interest rate?
No. Collateral is one part of risk assessment. Compare the offered rate, fees, legal costs and total repayable against alternatives.
Can I get a secured loan with an existing charge?
Possibly, but the lender must accept the charge position and any required consent. Existing secured debt and the valuation reduce available headroom.